What is the first step in developing a spending plan?

The first step in developing a spending plan is to verify the accuracy of income. Understanding your income is crucial because it provides a foundation on which to build your budget. If your income is not accurately assessed, the entire spending plan may be skewed, leading to potential overspending or underfunding of necessary expenses. By verifying income, you establish a clear picture of your financial resources, allowing for more informed and effective planning around expenses and savings goals.

Creating a list of creditors, while important for managing debts, comes later in the process. Reviewing cash flow is vital but typically follows the accurate verification of income to understand both inflows and outflows effectively. Dividing the budget into monthly cycles is a final step for structuring the spending plan after all relevant financial information, including income and expenses, has been established.